Will pay reform stall at the banks?

Disclosures from JP Morgan show its 'code' staff – those taking and managing risk – earned an average of £2.6m in 2010, while at Citigroup the figure was £2m but will the government extend Project Merlin to cover the investment banks?

The government is consulting on whether Project Merlin disclosures should be extended beyond the high street players to investment banks such as Goldman Sachs. Photograph: Chris Ratcliffe / Rex Features

Then the Merlin agreement between the banks and the coalition shed light on pay practices at the high street banks. For instance, Barclays was forced to admit that it paid five bankers £110m – when performance-related pay deals are included – in 2010. Two of them, Rich Ricci and Jerry del Messier – the co-heads of the Barclays Capital investment bank, got £40m apiece.

A new update to the FSA's code, following the intervention of the EU's banking regulator, also produced other revelations last year. The FSA's code required banks to publish the pay deals of "code staff" – those taking and managing risks – in aggregation. Barclays admitted it had 231 code staff earning an average of £2.4m while bailed-out Royal Bank of Scotland confessed to 323 code staff taking home an average of £1.1m.

Now, the big US firms with operations in London are also complying with this latest FSA rule in regulatory filings for year-end 2010.

Scrutiny of filings by JP Morgan, show that its 82 code staff were paid an average of £2.6m in 2010 – with the salary making up £264,000 of the total and a cash bonus amounting to almost £500,000. Some 4,422 of its 11,000 UK staff receive part of their pay in deferred equity. Citigroup has 95 staff who fall within the definition of code staff and were paid an average of £2m. Around £3m is disclosed for guaranteed payments and £2m was used buy "code" staff out of arrangements with a previous employer – a signing-on fee which the bank admits can only be used in exceptional circumstances.

All this information relates to 2010 and not 2011, the year for which the current round of bonuses are due, but helps to demonstrate the size of "average" deals for a very specific set of staff working in the City.

There are still problems, though, with accessing just how big the pay packets of the biggest earners are. The "code staff" data provides information useful to providing averages – but does not go as far as the recommendations set out for Labour by Sir David Walker who said that banks should provide details of the number of staff earning over £1m. (When asked, the only bank to provide specific numbers for 2010 was HSBC, which said 253 were paid more than £1m that year).

The Merlin disclosures also present difficulties. The rules allow the banks to select the top five key staff who reported to chief executives to be disclosed, allowing the star traders and other big earners to be excluded. HSBC demonstrated this last year – under Hong Kong rules its five "highest-paid individuals globally" received a combined £34.3m in salaries, bonuses and pension contributions but under the disclosure required in the UK through Project Merlin, the total of the "five highest-paid senior executives" was just over £12m.

The government is now consulting on whether the so-called Merlin disclosures should be extended to the top eight – and include not just the high street banks but also the likes of Goldman Sachs. The consultation period runs until mid-February – perilously close to a point when the UK banks might argue they cannot wait for new rules before they publish annual reports where pay is traditionally disclosed.

Despite all the government's pledges to crack down on top pay, it remains to be seen whether it will press on with this disclosure of the top eight, whether it will spread its reach beyond the high street banks, and whether it will demand clear, concise information that can be used for the basis of comparisons. This is something the current system does not allow. For instance, the averages for the code staff need to be worked out manually, while decisions also need to be made about what elements of pay to include in the calculation.